On my recent trip to KC, I got to relive my worst experience in the REI business, on a small scale, vicariously through a current and very real experience of another unfortunate investor.
We went to do a walkthrough of this great future rental property after my business partner was contacted by an out of state investor with some very real needs. More real than he dared to imagine.
The Cliff's notes of the situation are such:
This investor had purchased the property from our wholesale team more than 5 months ago with the intention to renovate it and and put a great tenant in it at $900/mo.
The investor indicated he had a family member in town and that he had been connected with another team to manage and complete this project, which should have taken less than 60 days.
5 months later he reached back out to our team and indicated that communication had gone sideways but that he was being told the house only needed carpet and that he owned a final amount of "X" for the project to be complete.
We went to take a look and assess the situation. What we found was a gut wrenching mess. My heart sank as soon as I walked in and realized what was happening as I had experience the same thing on a grander scale several years ago.
As you can see by the pictures, the house needs everything, not just carpet. Although the walls HAVE been painted. We are talking electrical, plumbing, flooring, carpet, doors, kitchen, bathrooms, sheetrock repair, 3 40 yard dumpsters full of debris cleanup becuase the contractors were nice enough to use his property as a dumping ground from other projects, furnace, water heater, even STAIRS down to the basement/garage because they were gone. It was a mess. Not much better than it was 5 months ago. And now even the AC had been stolen the week prior.
Our team is now taking over and will correct the issue ethically and get this property cash flowing within 2 months.
Some of the key lessons and takeaways:
- Do better due diligence on your teams.
- When running projects remotely, don't think you know better than other qualified people trying to give you advice.
- Don't continue to send money to your contractor without obtaining a full progress report with clear verification that the work that was supposed to be done, has actually been done.
- When a project manager or contractor begins to pass the puck and place blame somewhere else, there is a real problem going on.
- Require full video walkthroughs of each project, both throughout the project and at the end prior to sending the final draw. If your project manager and/or contractor is not tech savvy enough to do this, hire someone else.
There are many other lessons here but I wanted to give you a quick experience to hopefully serve you. For anyone just starting out or even if you've been doing it for a while and have not had your first heartache in your business, let this be a reminder of foundational core principles to follow.
I have tremendous experience in this having learned some of these lessons the very hard way. I was on top of the world with massive momentum and I let me guard down due to a personal recommendation from someone I thought had given me qualified information. I own that and learned some invaluable lessons on a much deeper level than many and also the lessons learned through the whole process of working to correct a terrible situation on a large scale of a dozen properties.
This happened years ago now but I can assure you that an experience like that always stays with you. It pushes you to the limit of who you really are and to levels you never even knew existed. What I do know, for anyone else out there who may be going through a difficult situation right now, including this investor who shall remain anonymous, is that if you remain diligent and maintain faith in yourself and persevere, you too will overcome your greatest challenges, whether in real estate or any other industry, and come out on top with a great testimony and amazing tools and experience with which to help others succeed, avoid pain and shortcut their journey to success.
I hope this served you.
